2) If the price of suntan lotion increases from $6 to $8 per bottle and quantity demanded
decreases from 900,000 bottles to 845,000 bottles, using the midpoint method, what is the price
elasticity of demand for suntan lotion?
3) When the price of a movie ticket falls from $14 to $10, the quantity of tickets demanded
increases from 500 to 700 a day. What is the price elasticity of demand for movie tickets? (Use
the midpoint method.)
4) If the price of a magazine increases from $5 to $7 and the quantity demanded of the
magazines decreases from 10 million per month to 8 million per month, using the midpoint
method, what is the price elasticity of demand? Show your work. Is the demand elastic, inelastic,
or unit elastic?
5) Suppose the price elasticity of demand for bouquets of flowers is 4.0. You are charging $8 per
bouquet. If you want to increase the quantity of bouquets you sell by 20 percent, what price
should you charge?
6) The price elasticity of demand for adults for cigarettes is 0.4. If government wants to reduce
smoking among adults by 15 percent, by what percentage should it raise the price of cigarettes?
Teenagers have a higher price elasticity of demand for cigarettes than do adults. Suppose the
price elasticity of teenagers’ demand for cigarettes is 0.8. If the government imposes a tax on
cigarettes that raises the price to reduce overall smoking by 15 percent, by what percentage will
the government reduce teenage smoking?
Price
(dollars)
Quantity demanded
(units per week)
A
100
40
B
80
60
C
60
80
D
40
100
E
20
120
7) The table above gives the demand schedule for a good. Using the midpoint method, find the
price elasticity of demand between points A and B, between B and C, between C and D, and
between D and E.
8) The figure above shows the demand curve for pizza. Using the midpoint method and moving
from point A to point B, calculate the
a) percentage change in price.
b) percentage change in quantity demanded.
c) price elasticity of demand.
9) In the figure above, at which point (a, b, or c) along the linear demand curve illustrated would
demand be
a) most elastic?
b) most inelastic?
Price
(dollars)
Quantity demanded
(units per week)
A
100
40
B
80
60
C
60
80
D
40
100
E
20
120
10) The table above gives the demand schedule for a good. What is the total revenue at point A?
At point B? At point C? At point D? At point E?
Price
(dollars per
admission)
Quantity demanded
(thousands of visits
per week)
10
100
8
200
6
300
4
400
2
200
11) The table above gives the demand schedule for museum visits.
a) You, as the resident economist, have been given the task of maximizing the museum’s total
revenue. What admission price should you charge?
b) What is the elasticity of demand between $6 and $4?
c) Moving along the demand schedule from $10 to $8 to $6 and ultimately to $4, how does the
price elasticity of demand change in size?
Price
(dollars)
Total revenue
(dollars)
1.00
110
1.25
125
1.50
125
1.75
100
12) Steve sells hotdogs from a vending cart downtown. The table above shows his total revenue
per day at four different prices. Between which two prices is the demand for hotdogs
a) elastic?
b) unit elastic?
c) inelastic?
13) Suppose bad weather decreases the wheat harvest by 12 percent. If the price elasticity of
demand for wheat is 0.6, how would the crop failure affect the price of wheat? Would the crop
failure benefit or harm wheat farmers?
14) When the price of Ford pickup trucks rises from $18,000 to $19,000, the quantity of Chevy
trucks demanded increases from 112,000 to 144,000. What is the cross elasticity of demand
between Ford and Chevy trucks?
15) When the price of bananas rises 2 percent, the quantity demanded of peanut butter falls 4
percent.
a) What is the cross elasticity of demand between these two goods?
b) How are these goods related?
c) If the price of bananas rises, how will that affect the demand curve for peanut butter?
16) Consider two goods: peanut butter and jelly. If the price of jelly increases from $2 a jar to $3
per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the
cross elasticity of demand? Are the goods substitutes or complements?
17) A 10 percent increase in income brings about a 15 percent decrease in the demand for a
good. What is the income elasticity of demand and is the good a normal good or an inferior
good?
18) If income increases from $50,000 to $60,000 while the demand for a good increases from
100 units to 125 units, what is the income elasticity of demand? Is the good a normal good or an
inferior good?
19) The income elasticity of demand for movies in the United States is 3.41. If people’s incomes
decrease by 1 percent, what is the decrease in the quantity of movies demanded?
20) Jenny’s weekly income increases from $500 to $650. As a result, she goes out for dinner one
day a week instead of one day every other week. What is Jenny’s income elasticity of demand for
restaurant dinners?
Income
(dollars)
Quantity demanded
(pounds per year)
18,000
60
22,000
140
21) The table above gives Sharon’s demand for ground beef at two different income levels. Use
the midpoint method in this problem.
a) What is the percentage change in Sharon’s income?
b) What is the percentage change in the quantity demanded?
c) What is Sharon’s income elasticity of demand for ground beef?
d) Is ground beef a normal or an inferior good for Sharon?
22) If the price increases by 20 percent and the quantity supplied increases by 40 percent, what
does the elasticity of supply equal?
23) Suppose the quantity supplied of computers increases from 2 million to 4 million units as the
price of a computer increases from $600 to $700. What does the price elasticity of supply equal?
24) When the price of oil is $80 per barrel, the quantity of oil supplied is 74 million barrels per
day. When the price of oil is $60 per barrel, the quantity of oil supplied is 71 million barrels per
day. What is the elasticity of supply of oil? (Use the midpoint method.)
Price
(dollars)
A
100
B
80
C
60
D
40
E
20
25) The table above gives the supply schedule for a product. Using the midpoint method, find the
price elasticity of supply between points A and B, between B and C, between C and D, and
between D and E.
26) June makes holiday wreaths and sells them during the holiday season. The figure above
shows her supply curve of wreaths per week. Use the midpoint method in this problem.
a) Calculate the percentage change in quantity between points A and B.
b) Calculate the percentage change in price between points A and B.
c) Calculate the price elasticity of supply between points A and B.
7 True or False
1) The price elasticity of demand equals the slope of the demand curve.
2) Price elasticity of demand is a units-free measure.